Thursday, June 4, 2015

Why Companies Can No Longer Afford to Ignore Their Social Responsibilities

corporate social responsibility


A company’s sense of responsibility towards the community and environment (both ecological and social) in which it operates. Companies express this citizenship (1) through their waste and pollution reduction processes, (2) by contributing educational and social programs, and (3) by earning adequate returns on the employed resources. See also corporate citizenship.

Reasons why social responsibilities have failed


List of corporate collapses and scandals

From Wikipedia, the free encyclopedia
  (Redirected from List of corporate scandals)
A corporate collapse involves a major insolvency or bankruptcy of a failure. A corporate scandal involving allegations of unethical behavior by people acting within or on behalf of a corporation. A corporate scandal sometimes involves accounting fraud of some sort. A wave of such scandals swept many United States companies in 2002 (see list at accounting scandals).


List of major corporate collapses

The following list of corporations involved major collapses, through the risk of job losses or size of the business, and meant entering into insolvency or bankruptcy, or being nationalised or requiring a non-market loan by a government.


Corporate Social Responsibility (CSR)

Chapter 1 Introduction

Corporate Social Responsibility is a rapidly developing, key business issue. It is a concept that has attracted worldwide attention. Due to the demands for enhanced transparency and corporate citizenship, CSR started to embrace social, ethical as well as environmental challenges. Today, companies are aware of the social and environmental impacts of international production. It is accepted that Companies should not be only profitable, but also good corporate citizens.
Through globalization of the economy, multinational companies are increasingly involved with suppliers and customers worldwide, especially if they operate in developing countries. The CSR agenda has a close relationship with international development. CSR within multinational companies is seen as a vehicle through which larger, well known corporations can contribute to the well being of developing countries by operating responsibly in terms of social and environmental issues. However, the promoted "CSR" in the developing world by multinationals is "not real CSR", despite significant contribution to development in some cases. Very little is known about the companies' CSR policies and practices in an international context, developing countries in particular. As reality shows, most of the larger corporations abuse the CSR and behave unethically and irresponsibly towards both society and the environment. Issues such as unsafe working conditions, unfair payment, gender discrimination, sexual harassment, toxic emissions and the hazardous pollution of water and soil have all raised fair allegations by consumers, non-governmental organizations and the larger society. . Famous global brands like Nike, Coca-Cola, GAP and McDonalds are often under intense pressure from the public. Much of those pressures are due to their unethical behaviour in developing countries, where their main operations take place. Though companies operate in host countries, their reputation extends across numerous national boundaries. The actions of multinational companies in a host country can cause significant loss of reputation in the developed world, where the general public have become more sensitive to environmental issues and social impact. The public have the power to boycott the goods and products of multinational corporations in cases of unethical behaviour where organisations are thought not to fulfil their social and environmental obligations. However, international reputation side effects are not the only reason behind the potential increased level of social and environmental responsibilities faced by multinational companies; there are many drivers for the correct implementation of CSR by business entities. However, for many companies, corporate reputation and brand image are the fundamental components of business success.


Aims and Purpose:

To illustrate how businesses have succeeded and failed to be socially responsible by researching companies’ performances in corporate philanthropy, employee health and safety, environmental stewardship, and minority and women’s employment and advancement.


Why Companies Can No Longer Afford to Ignore Their Social Responsibilities

In 1970, the economist and Nobel laureate Milton Friedman published an article in The New York Times Magazine titled, “The Social Responsibility of Business Is to Increase Its Profits.” In the article, he referred to corporate social responsibility (CSR) programs as “hypocritical window-dressing,” and said that businesspeople inclined toward such programs “reveal a suicidal impulse.” Even four decades ago, at a time of growing public concern for the environment, his views represented the general skepticism and contempt with which many in Corporate America viewed CSR.

Times have changed. There remain company chieftains who take a Friedman-esque view, of course, but many more have made CSR a priority. Ten years ago, for instance, only about a dozen Fortune 500 companies issued a CSR or sustainability report. Now the majority does. More than 8,000 businesses around the world have signed the UN Global Compact pledging to show good global citizenship in the areas of human rights, labor standards and environmental protection. The next generation of business leaders is even more likely to prioritize CSR. According to data released this month by Net Impact, the nonprofit that aims to help businesses promote sustainability, 65% of MBAs surveyed say they want to make a social or environmental difference through their jobs.
Today, amid a lingering recession that has dented corporate profits and intensified pressure from shareholders, companies are devising new CSR models. Rather than staffing a modest CSR department — and slapping it on the org chart as a small offshoot of the public relations (PR) or philanthropy division — many companies are instead trying to embed CSR into their operations. Some blue-chip companies, such as Visa, are creating new markets in the developing world by closely aligning social causes with their overarching corporate strategies. Others, such as Walmart, have made ambitious commitments to sustainability as a way to save money and tighten their supply chain.
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“CSR is an old-fashioned idea that needs to be upgraded,” says Eric Orts, professor of legal studies and business ethics at Wharton and director of the school’s Initiative for Global Environmental Leadership. “For companies to take CSR seriously, it has to be integrated into the DNA of the enterprise. Companies need to say: ‘We want to make money, sure, but we also care about our effect on society and the environment. And that comes through in the kinds of jobs we provide, the kinds of products we make and the ways in which we use resources.'”
Ignore CSR at Your Peril
One of the biggest criticisms leveled against CSR is that companies only care about it for marketing purposes. CSR is merely a buzzword embraced by corporations because they “should.” “For most companies, [CSR] is PR,” according to Ian C. MacMillan, professor of innovation and entrepreneurship at Wharton. “It looks good. It sounds good. It’s the ‘right’ thing to do — and it gets the media out of their face.”
These days, corporate motivation seems almost beside the point because of the significant business risks to ignoring CSR. Consumers and other companies are likely to shun firms that develop unethical reputations. And arguably, companies that don’t pay attention to their ethical responsibilities are more likely to stumble into legal troubles, such as mass corruption or accounting fraud scandals.
Quite simply, companies care about CSR because their customers do. Consumers, by and large, are a self-motivated and self-interested lot. But numerous studies indicate that a company’s CSR policies increasingly factor into their decisions. For example, a survey by Landor Associates, the branding company, found that 77% of consumers say it is important for companies to be socially responsible. “There’s a heightened awareness of the need to be, and to be seen as, a good corporate citizen,” says Robert Grosshandler, CEO of, which helps consumers direct a percentage of their online purchases to support charities.
And in the Electronic Age, where information about a given company’s environmental record and labor practices is readily available — and readily tweeted and retweeted — companies must pay careful attention to what their customers do and say. “In the Information Age, customers have more access to information,” says Grosshandler. “They’re more educated. They’re no longer hidden from how their food is produced or how their iPods are made. And, because of things like social media, like-minded people more easily find each other, have their say and effect change. There’s a level of transparency that wasn’t there before.”
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CSR is also a way to attract and retain talent. In a global workforce study by Towers Perrin, the professional services firm, CSR is the third most important driver of employee engagement overall. For companies in the U.S., an organization’s stature in the community is the second most important driver of employee engagement, and a company’s reputation for social responsibility is also among the top 10. According to a Deloitte survey conducted last year, 70% of young Millennials, those ages 18 to 26, say a company’s commitment to the community has an influence on their decision to work there.
“The Millennial generation has seen a lot of natural disasters, political disasters and corporate disasters. They think the world is screwed up,” says Kellie McElhaney, who is the faculty director of Haas’ Center for Responsible Business. “They feel personally responsible, and they feel empowered to create change.”
Bottom of the Pyramid
The global financial crisis has not been kind to CSR departments. While data on precise numbers of CSR positions is hard to come by, sustainability practitioners say that many companies have scaled back in recent years (although CSR has not been cut disproportionately to other cost centers).
Partly as a result of the crisis, some companies have refined their approach to CSR by more closely relating social causes to their core businesses. This approach, according to Jerry (Yoram) Wind, a Wharton marketing professor, interprets CSR as “socially responsible capitalism…. At the company level, the business objectives need to be to both maximize shareholder value in the long term and to address society’s biggest problems,” says Wind, also the director of the school’s SEI Center for Advanced Studies in Management. ” This requires having any CSR initiative be an integral part of the business strategy and not a separate department.”

Take the Coca-Cola Company, which recently started a program to empower young women entrepreneurs. The 5×20 program aims to bring five million women in the developing world into its business by 2020 as local bottlers and distributors of Coca-Cola products. Research suggests that such an investment in women can have a multiplier effect that leads not only to increased revenues and more workers for businesses, but also to better-educated, healthier families and eventually more prosperous communities.
Visa is another example. The company has built partnerships with local governments and non-profits focused on financial inclusion. These alliances are already transforming the economic architecture in parts of the developing world by giving financially underserved people a way to pay, get paid and save money, sometimes through electronic and mobile payment systems. Research by the Gates Foundation and others has shown that the usage of these kinds of services enables poor people to better withstand blows to their personal finances, build assets and connect into the wider economy.
Does Coca-Cola benefit from more bottlers? Yes. Does Visa benefit from more people using its services? Absolutely. But these CSR efforts seek to capitalize on “the fortune at the bottom of the pyramid,” an idea that C.K. Prahalad popularized in his 2006 book of the same name. Prahalad referred to the largest, but poorest, socio-economic group in emerging economies as seeds for future growth markets.
“There are large numbers of people in the world who have no jobs and who have no hope. They need jobs and more education, better healthcare and food. They need to be self-sufficient, not dependent because some do-gooder gave them a handout,” says Wharton’s MacMillan. “Companies need to start creating markets in these places.”
These new markets represent a long-term investment, he adds. “It’s a pattern of enlightened self-interest: The company ends up better off with customers they have seeded who are healthier, better nourished and have more education. And [the company] has residual loyalty because [it] was there first.”
Saving Money, Saving the Planet
Other companies are taking a slightly different approach: viewing CSR as a cost-saver. “The downturn has refocused CSR practitioners,” says Marcus Chung, vice president of the CSR and sustainability practice at Fleishman-Hillard and former head of CSR at Talbots, the women’s apparel chain. “There are more CSR practitioners today whose main job is to find ways to support business strategy and save the company money.”
Many CSR professionals serve as internal consultants providing counsel to colleagues and acting as a resource for decisions concerning real estate, supply chain or operations, he adds. “They are helping other departments understand the financial rewards of more sustainable operations. This approach to CSR has become more key in the last few years.”
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Climate Corps, the Environmental Defense Fund’s summer internship for business school students, follows this model. The fellowship places MBA students in Fortune 500 companies, cities and universities to build the business case for energy efficiency. Since 2008, the program has helped organizations cut 1.6 billion kilowatt hours of electricity use and avoid more than one million metric tons of CO2 emissions annually, and has saved $1 billion in net operational costs.
Walmart is another example. Its social responsibility policy is encompassed by three goals: to be fully supplied by renewable energy, to create zero waste and to sell products that sustain people and the environment. These are lofty targets — and if achieved, ones that ultimately save the company a great deal of money. “The company is not perfect, but it is dealing with sustainability squarely as a business imperative,” says Haas’ McElhaney, adding that “These are hard-core measurable and reportable goals. The main criticism is that the company is shoving this down the supply chain’s throat, but if you’re Wal-Mart, that is your leverage.”
Nien-hê Hsieh, co-director of the Wharton Ethics Program and a visiting professor at Harvard Business School this year, describes Walmart as a company that complicates the CSR picture. “On one hand, it has been challenged on its labor practices and the Mexican bribery scandal,” he says. “But on the other hand, it has had an aggressive sustainability policy. If Walmart does alter its global footprint, it would make a difference in the world.”
At the entrepreneurial level, some smaller, niche companies are experimenting with CSR as a mission of the triple bottom line: people, planet and profits. Take, for instance, the advent and gradual spread of so-called B Corporations, which are recognized in seven states, including California and New York. B Corps, as they are known — the “B” stands for beneficial — are a new kind of business entity that by law are required to generate social and environmental advantages.
The designation is only a few years old, but already there are more than 500 certified B Corps across 60 different industries. Companies include Seventh Generation, the maker of natural household and personal care products; Pura Vida, which sells organic, fair trade coffee; Etsy, the online market for handmade goods; and King Arthur Flour. Wharton’s Orts calls B Corps “interesting experiments for a more fundamental merging of the goals of traditional profit-making and social responsibility.”
The B Corps model of integrating CSR concerns into normal business practices may hold a key for how large publicly traded firms ought to reset their corporate vision and objectives, he says, adding that a “major rethinking of the relationship between Wall Street investors and business management” is in order. The pressure on companies to maximize shareholder returns makes it very difficult for them to undertake long-term investments for the social good if these decisions will drive down their short-term stock prices.
“If there is one thing that the financial crisis and stock market crash of 2008 should have taught us, it is that short-run share prices are an unreliable indicator of long-run business sustainability,” says Orts. “The idea that companies don’t have any independent ethical responsibility for the consequences of their actions on the environment and society just doesn’t make sense. It is an outmoded view to say that one must rely only on the government and regulation to police business responsibilities. What we need is re-conception of what the purpose of business is.”

Republished with permission from Knowledge@Wharton, the online research and business analysis journal of the Wharton School of the University of Pennsylvania.


Business Failure and Corporate Managerial Responsibility


Brian Steverson & Mark Alfino
Department of Philosophy
Gonzaga University

March 14, 1997

Prepared for blind review for inclusion in the Annual Meeting of the Society for Business Ethics
August 7-10, 1997, Boston, MA

Business Failure and Corporate Managerial Responsibility 

When businesses fail, their ability to honor agreements, uphold promises, and act on the higher ideals of their mission statements is often compromised. Following the ethical maxim that Aought implies can,@ business ethicists often grant that our practical obligations have to be understood against the backdrop of the relative scarcity or abundance of the business and social environment. Nothing brings on scarcity more dramatically than the total liquidation of a business=s assets. Bankruptcy protection and reorganization can, and probably should, lead businesses to cut back on some of their obligations. But even if we allow this concession to practical exigency, we can still ask probing questions about how the future possibility of business failure may ground our understanding of the current actual obligations of owners and managers (hereafter, managers) to employees. While the obligations of the bankrupt business may devolve to minimal contractual obligations, an analysis of the responsibility of managers for business failure may tell us something important about the nature of both employment and managerial ethics.
In the popular imagination, many business failures are thought of as misfortunes dealt out by a capricious and impersonal market. Indeed, we often talk of business successes as similarly adventitious, like lottery windfalls. But business analysts have built an entire genre of business writing, what might be called the Apost mortem case study,@ around a belief that most business failures could either be predicted or prevented. While the authoritativeness of this genre is clearly enhanced by hindsight, we can surely make a distinction between business failures which are no one’s fault, in the sense that no reasonable person could have foreseen them, and failures which are the management’s fault, in the sense that a reasonably prudent and informed management could have prevented them. Interestingly enough, there are not many other possibilities. Sure, the occasional business is brought to ruin by the actions of a single employee, and some businesses are ruined by the culpable actions of third parties, but the failure of a business of any significant size is, generally, either no one’s fault or the management’s fault.
With this principle in hand, that the failure of a business is, generally, either no one’s fault or the management’s fault, we argue that the conditions under which businesses fail imply a corporate or group responsibility on the part of management to its employees. This takes us beyond two traditional positions: first, that the obligations between managers and employees are purely contractual; and second, that there is no moral obligation between the two parties, merely a mutual self-interest in the success of the enterprise. Our approach to ascribing managerial responsibility is novel because it is based on a theory of collective liability and corporate vicarious agency. Traditional approaches to employer-employee obligations are based on: 1) contract theory, the terms of the employment contract; 2) agency theory, the manager’s agency relationship to a principle, such as an owner or stockholder; or, 3) stakeholder theory, the idea that employees deserve consideration by virtue of the fact that they can be affected by organizational decision making. By basing our argument on a liability theory of corporate agency, we avoid some of the limitations of contract and agency theories. As we will show, a corporate liability theory provides a better foundation for stakeholder theory.
Why should we think of a business’s management team as collectively responsible for that business’s failure in cases in which someone is to blame? Don’t businesses fail for many reasons which are not the fault of the management? Employees might not maintain their skills, financial conditions may delay reinvestment in capital assets, and markets may change demand for the business’s product. The problem with most excuses for business failure that shift blame away from managers is that they require us to believe that a management team is incapable of anticipating changes in labor, capital, financial, and market conditions, or somehow not responsible for trying. The fact that business failures often affect only one or two businesses among a group of competing businesses belies this way of thinking. Of course, some management teams might just be making lucky guesses to keep their businesses profitable, however, post mortem case studies give plausible explanations for thinking that when business failures are anyone’s fault at all, they are the managers’ fault.
Identifying business failure with managerial fault does not by itself show that managers bear a collective vicarious liability for business failure, nor that they are liable to employees rather than owners for their faulty management. In his work on collective responsibility, Larry May identifies two conditions for ascribing collective responsibility to an organization for the conduct of one or more of its members. Corporate vicarious negligence requires both a causal factor and a fault factor. As May explains:
    1. causal factor - the member of the corporation was enabled or facilitated in his or her harmful conduct by the general grant of authority given to him or her by corporate decision.
    2. fault factor - appropriate members of the corporation failed to take preventative measures to thwart the potential harm . . . even though: 1.) . . .[they] could have taken such precautions, and 2.) . . . [they] could reasonably have predicted that the harm would occur. (May 1983, 321)
Those familiar with May=s theory may wonder if it is not misapplied in this case. First, discussions of group responsibility are usually about determining the conditions under which the group is responsible to a third party for the actions of one of its members (e.g., Is a university collectively responsible for the sexual harassment of a student by a professor?). But in this case, we are using the theory to ascribe a collective responsibility of one group within an organization to another group in the same organization. Second, one might wonder why managers are the appropriate group to focus on. Just as no one employee can usually sink a business, so also no one manager can. If manager’s are collectively liable to employees for business failure, than employees are no less collectively liable to managers. The responsibilities are mutual and symmetrical. But if we look further into May’s theory we will see what is wrong with this view.
The theoretical basis for ascribing collective vicarious agency to a whole corporation is the "causal nexus between stockholders or board members and supervisors or employees" (May, 1983, 319). It is true that May does not differentiate between the conditions which make a corporation collectively responsible for its manager’s conduct and the conditions which make it responsible for its employees’ conduct. It can be responsible for both. But a crucial feature of May's theory is that collective responsibility is not a product of the unique decision making structure of the corporation, nor of the legal status of the corporation, but merely of the causal connections that allow for coordinated action. In The Morality of Groups, May shows how these conditions can be present in such "unofficial" social groups as mobs (May 1987).
The second objection, that if there is a collective liability between managers and employees, it is symmetrical, is only credible if one ignores the asymmetry in the "grant of authority" which enhances each group’s ability to harm the other. Managerial teams have a unique ability to study and direct the activity of non-managerial employees for the purpose of maintaining the profitability of the organization. They are almost always in a better position to satisfy the "fault factor" necessary for vicarious negligence. On the other hand, there may be situations in which a specific group of employees could be held collectively vicariously negligent, since May’s theory does not ascribe group responsibility solely on the basis of the formal assignment of duties (May 1983, 320).
Two immediate consequences for management ethics follow from this argument: First, the professional responsibilities of managers can no longer be seen as following exclusively from the agency relationship that they have to owners. While the authority that comes with being someone’s agent is a necessary condition for their responsibility to business owners, it is also part of the basis for making them liable to the employees they manage. Second, organizations which hold to traditional organizational structures which sharply separate managerial and non-managerial work have a heightened liability to their non-managerial employees for business failure. In the organization which devolves managerial responsibility to most of its workers, the collective responsibility for failure falls more squarely with the entire corporate workforce.
May’s view is not just a helpful theoretical perspective for rethinking management theory, but also a practical framework for thinking about corporate culpability. Since the Federal Sentencing Guidelines for Organizations became law in 1991, the notion of corporate culpability has had a role in determining corporate liability, and, consequently, corporate punishment. The Guidelines refer to the "culpability of the organization" along with "the seriousness of the crime@ as determining factors in setting the appropriate fine range for organizations committing remediable harm, but which are not Aoperated primarily for a criminal purpose or primarily be criminal means, and then go on to list criteria by which to assess an organization’s "culpability score" and its impact in determining the appropriate fine range. The Guidelines reflect, though not perfectly or explicitly, a recognition that organizations such as corporations can develop what Jennifer Moore calls a "corporate character" embodying the "goals, rules, policies, and procedures" of the corporation which in turn shape the behavior of its agents (Moore 1992).
For our purposes, the importance of the Guidelines is that they are a legal recognition of punishable corporate responsibility to groups or individuals within and outside of itself, and, even more importantly, a recognition that the primary component of such culpability is the causal role that organizations play in shaping the behavior of their agents. Our focus is on another such causal relationship, that which exists between managerial decisions and a corporation’s success or failure, as providing grounds for assigning organizational responsibility to managers for the harm caused stakeholders as the result of corporate or business failures. The two are connected in that management can be held culpable for the decisions and actions of its members (the causal factor for vicarious agency), and one of the things that its members can be held uniquely causally accountable for is the success or failure of the business. Our approach differs from traditional stakeholder theory, which typically accounts for the obligations that managers have to stakeholder groups in contractarian terms (e.g., employees expect managers to look after their welfare in exchange for their labor and loyalty). Our contention is that the responsibility managers incur for the harm caused by business failure is not due to a violation of some contractual agreement, hypothetical or real, nor is it a consequence of their formal agency relationship to owners or stockholders. Rather, it is due specifically to the unique, collective, and causal role they play in business failure or success. Accordingly, an unique dependency exists between the fate of stakeholder groups like employees and management, sufficiently strong to ground a custodial obligation to employees.
This way of accounting for the stakeholder obligations existing between management and workers more adequately captures the sense in which it is a stakeholder obligation than traditional stakeholder theory. Traditionally, at least in academic business ethics, stakeholders in organizations have been defined as groups or individuals who can affect or be affected by organizational decisions and behavior (Freeman E. & Reed, D. 1983). Goodpaster has used the metaphor of a player in a game of poker to capture the sense that a stakeholder is "one who plays and puts some economic value at risk" via their interaction with organizations like corporations (Goodpaster 1991). Freeman and Reed have distinguished between a "narrow definition" of stakeholders, which includes those groups who are vital to the survival and success of an organization, and a "wide definition," which includes any groups who can affect or be affected by an organization. Now, strictly speaking, the "narrow definition" really does not capture the sense of "stakeholder" which is requisite for grounding organizational obligations to stakeholder groups. The fact that an organization is vitally dependent upon some group or individual for its success and survival does not, by itself, mean that such groups or individuals have any stake in the success or survival of the organization. For example, it is obviously true that individual productive organizations are dependent upon consumers for their success and survival, but consumers do not, thereby, have any stake in whether that particular productive organization survives or not. In an adequate market, where there are other firms producing similar and equally desirable goods, the survival or success of any particular productive organization is not something consumers necessarily have a stake in, especially not in Goodpaster=s sense of having some economic value at risk. Likewise, in certain job markets (e.g., professional sports), the success of a business organization may hinge upon the presence and performance of specific employees, yet their livelihood and continued well-being may not be staked to the success of that particular organization since equally satisfactory work may be readily available elsewhere. The "wide definition" fares better, in that it includes the criterion "be affected by," which reflects the proper dependence relationship for stakeholder status, but the inclusion of the "can affect" ought to be dropped for the same reason that the "narrow definition" inadequate (i.e., wrong dependence relationship).
Furthermore, simply having a stake in the outcome of some group or organizational decision making does not entail that those involved in such decision making have any obligations to other stakeholders who may be affected negatively or positively by the decisions made. For example, consider Goodpaster’s analogy. Each player has an economic stake in the outcome of each hand, but none of the players has any obligations to one another to act in their best interest. Each player rightfully acts in their own best interest, as long as the rules of the game are obeyed. In fact, the object of poker is to intentionally defeat the interests of the other players. One of the features of this kind of stakeholder activity is that each player has extensive control over their stake in the game. The better the player one is the more such control one has. Each player has (or ought to have) an understanding of the risks involved in the game, and can act so as to minimize them, and, at the same time, enhance their chances of being successful. Of course, each stakeholder is dependent on the decisions of every other stakeholder involved in the game, but that dependency is minimized by the fact that each player can anticipate and react to the decisions of others, again, so as to protect their own chance at successfully continuing in the game. Consequently, even though a poker player has an economic value at risk, that risk is self-manageable, and other players have no obligations to assist fellow players in avoiding the harm that can result from participation.
It is this "control" factor which, if it is reasonable to assume that business failure is either no one’s fault or management’s fault, is generally missing from the stakeholder relation between employees and the organizations they work for. Unlike in the game of poker, as stakeholders, employees lack the requisite power to manage the risk associated with possible business failure. They are, for the most part, entirely dependent on the decisions and actions of management for the continuation of their employment. It is this unique kind of asymmetric dependency which generates the vulnerability that characterizes the employee-management relation, and which most adequately describes the kind of stake that employees have in the continued success and survival of the organizations they are a part of. Unlike a traditional contractarian accounting of the stake that employees have in organizations which describes that stake in terms of an expected exchange between management and employees (labor and loyalty in exchange for compensation and fair treatment), this way of looking at the nature of the sake employees have in organizational decision making reveals that the ground of the obligation management has to look after the welfare of their employees is not the fulfillment of some real or hypothetical exchange agreement, but, rather, in the fact that management singularly holds the power and responsibility for the success and survival of business organizations, which itself represents the "pot" that employees hope to gain a share of. Put another way, if one were to make use of the "Kews Gardens Principles," namely "need, proximity, capability, and last resort," developed by Simon et al to account for the minimum corporate responsibility of avoiding social harm, one can quite clearly see that in the case of business failure and the harm it causes stakeholders like employees, that all four conditions are readily met, with special emphasis on the fact that management represents the "last" and "only" resort for employees to turn to for help (Simon, J., Powers, C. & Gunneman, J. 1972).
By viewing the collective responsibility of management for the harm caused employees by business failure in this way, one can argue that management incurs a collective obligation to the employees of a business organization to manage that business successfully. Now, this may sound odd since we are accustomed to thinking that any duties management may have to run a business successfully they would have only to the owners or shareholders of the business and would have them because of a fiduciary relationship. Management might have varying obligations to employees for a number of reasons, but surely the obligation to be "good managers" wouldn’t be one of them. Our account of the unique collective, causal role that managers occupy in relation to business success or failure and the resulting dependency that employees have on managerial decision making, is intended to show that one can legitimately and meaningfully extend such a mangerial obligation to employees.


Freeman, E. & Reed, D. (1983). Stockholders and Stakeholders: A New Perspective on Corporate Governance. in C. Huizinga, (ed.), Corporate Governance: A Definitive Exploration of the Issues. Los Angeles, CA: UCLA Extension Press.

Goodpaster, K. (1991). Business Ethics & Stakeholder Analysis. Business Ethics Quarterly, 1, 53-73.

May, L. (1987). The Morality of Groups . Notre Dame, Indiana: University of Notre Dame.

May, L. (1991). Vicarious Agency and Corporate Responsibility. in P. French (ed.), The Spectrum of Responsibility, (pp. 313-324). New York: St. Martin's Press.

Moore, J. (1992). Corporate Culpability under the Federal Sentencing Guidelines. Arizona Law Review 34.

Simon, J., Powers, C., & Gunneman, J. (1972). The Responsibilities of corporations and Their Owners. in the Ethical Investor: Universities and Corporate Responsibility, New Haven: Yale University Press.


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